Wins and losses: Uber and Lyft grapple with insurance questions, complex rules across U.S.

UberX and Lyft have become embroiled in pitched battles in cities and states across the country as they have spread in defiance of regulators and challenged long-protected taxis by enabling regular citizens to drive for hire in their own vehicles.

This week in Seattle, however, Lyft and UberX-owner Uber Technologies reached a compromise with the mayor, taxis and other interests that would legalize their smartphone-powered operations while eliminating the 150-vehicle limits that city officials put on them in March.

Click on the photo to see a map of states where ride-booking firms have won and loss.

The deal hinged largely on insurance requirements, and it still must be approved by the city council, but it could mark the latest in a series of legislative victories for Uber and Lyft, coming close on the heels of compromises that produced laws in the state of Colorado and the city of Chicago.

Will the trend sweep the rest of the country, where some jurisdictions have ordered UberX and Lyft to stop operating immediately in the vacuum of rules?

What about in California, where regulators and some state legislators, backed by insurers and trial lawyers, are calling for far more insurance coverage than what Chicago, Seattle and Colorado required? In Illinois, legislators have approved legislation that Uber and and Lyft have opposed, and it is awaiting the governors signature.

Seattle's compromise came only after Lyft and Uber — saying caps on drivers devastate their operations — spent a combined $400,000 to collect tens of thousands of signatures to qualify a ballot referendum. The city's law was then blocked pending an election.

Mayor Ed Murray didn't want to wait to get public safety protections in place, so he convened mediated negotiations that lasted two months.

The result is a proposal to require taxi-like insurance coverage — actually much lower in dollar terms than what Uber and Lyft were offering — but starting from the time apps are turned on, rather than once a call for a ride is accepted. The rules would last for one year, during which time efforts would be made to alter state insurance rules.

Seattle pact

One thing Uber, Lyft and another San Francisco-based competitor called Sidecar have going for them in Seattle is public support, said Tom Rasmussen, a councilman who chairs the city’s transportation commission. The panel will soon consider the compromise Murray touted Monday. Uber and Lyft tried to bring some of that public pressure to bear in Sacramento this week with a demonstration outside the state Capitol in opposition to Bonilla’s bill and another by Assemblyman Adrin Nazarian (D-Sherman Oaks), AB 612, that would increase other operating requirements on Uber and Lyft governing things like driver background checks.

Rasmussen is a fan of Lyft and Uber and voted against capping their vehicle numbers, even though he received support in the past from taxi operators. He recalled how his hairdresser angrily shook scissors at him and said to “leave Uber alone.” It had become her preferred method of getting home in a neighborhood lacking bus service.

“People in Seattle are very frustrated with taxi service,” said Rasmussen, citing a litany of complaints about customer relations and taxi availability. Similar issues have been raised in communities around the nation because the taxi industry in many cities is often heavily regulated and dominated by select companies. Critics say the set up is similar to monopolies.

Rasmussen nevertheless faulted both Lyft and Uber for their initial, confrontational approach for dealing with critics and regulators. In Seattle and other cities, both companies often opened for business first, and then later sought approval while pillorying local officials for protecting entrenched interests.

“I thought they were rather high handed, and I told them that,” Rasmussen said. “They would best leave the lobbying to someone else and they can stay in the office and run the business.”

Lyft spokeswoman Paige Thelen insisted her company does not ignore local regulators, but maintained that existing laws do not account for Lyft's innovative business model and the company is actively working with regulators to get rules that enable the company to safely operate.

Uber takes a similar position.

“Uber has and continues to work with local regulators across the nation, explaining how our technology works to increase consumer choice and expand economic opportunity for local entrepreneurs. In states like Colorado, we have worked closely with lawmakers which resulted in common-sense regulations that support innovation while maintaining our commitment to safety,” the company said in a prepared statement.

Coverage questions

Chicago and Colorado also recently approved rules that require coverage as soon as a driver opens an app, though they allowed a lower level of coverage when a driver has not accepted a call for service.

Colorado state Senator Ted Harvey, a Republican sponsor of the bill, said that insurance was unquestionably the biggest stumbling block to a compromise.

"I think the Colorado bill will be a prototype," he said. "I hope other states will be able to look to what we’ve done to achieve a balance."

The California Public Utilities Commission, however, recently proposed increasing its requirement to a blanket $1 million from the moment drivers turn on smartphone dispatching apps.

That could increase premiums for Lyft and Uber by 20 to 25 percent in the state, estimated Stuart Nelson, a veteran broker in Sacramento who was suggested an insurance lobbyist as an expert.

Chris Dolan, a prominent trial lawyer who is suing Uber on behalf of the family of a 6-year-old girl who was killed by an UberX driver looking for rides, insists that a blanket $1 million liability requirement is best. A former president of the Consumer Attorneys of California, he has been actively lobbying Bonilla on the issue.

In the Liu case, Dolan said San Francisco General Hospital got stuck with “hundreds of thousands of dollars” in medical bills because her family had no medical insurance and Uber has denied liability because the driver was not on a call.

Uber and Lyft pushed Bonilla hard for a tiered system, however, and after getting pressure from Sen. Alex Padilla, D-Los Angeles, in a committee hearing this week, she agreed to that in concept.

Lyft in a statement said the committee hearing "demonstrated that there is no clear consensus about how to best determine appropriate levels of insurance for ridesharing, and we will continue working with legislators to ensure that consumers, drivers and passengers have the ability to access safe rides from the Lyft community."

Insurers, the main sponsors of Bonilla's bill, have meanwhile said they are willing to discuss dollar amounts when the bill goes to the Senate Insurance Committee next week.

"The insurance companies were never opposed to the business model. It was never our intent to put them (Lyft and Uber) out of business. They just need to operate responsibily," said Bob Passmore, a senior director at the Property Casualty Insurance Association of America. "Trying to find that middle ground has been the tricky part."